Analysts: Apple Needs to Rethink Its TV Strategy
Amid reports that Apple's efforts to penetrate the television market are foundering, industry analysts are urging the company to try a new approach. What worked in the past with the iPhone and iPad might not for television, so it may be time for Apple to heed its own advice and Think Different.
09/07/12 5:00 AM PT
Reports that Apple's ambitions in the television arena have snagged in negotiations with media companies are an indication that the gadget maker's big screen strategy is flawed, according to Trip Chowdry, managing director for equity research at Global Equities Research.
"Apple's approach is wrong," he told MacNewsWorld.
Apple is trapped in a chicken-and-egg problem, he explained. "Content providers won't jump on the Apple TV [set] until it has a massive consumer base," he said, "and consumers aren't going to jump on Apple TV until it has a content base."
"Apple's strategy is fundamentally flawed, he declared. "It has to start thinking outside the box."
Over There First
Such an out-of-the-box strategy would be to avoid the morass in the United States entirely and launch its TV product overseas first, he suggested. "There is less resistance to Apple from media content providers internationally," he contended.
The textbook case for such a strategy is, ironically, Google's Android operating system. "Android became successful internationally and then it became a success in the U.S.," Chowdhry observed.
Android built up so much momentum offshore that when it eventually arrived, "it washed over the U.S. like a tsunami," he said. "That's the strategy that Apple should be doing."
Another possible strategy to break the current logjam between Apple and the television establishment is to adopt the same approach it used to build the popularity of the iPhone: give a single operator exclusive dibs on Apple's TV solution.
That path received mixed reviews from media experts interviewed by MacNewsWorld. "If they do that and it's successful, it will transform the industry," said telecom industry analyst Jeff Kagan.
"All Apple needs is one cable company to start the process," he reasoned, "and it will get all the attention in the media and all the customers will want it and it's going to start growing like crazy."
Apple's reported tete-a-tete sessions with cable providers suggests a change in its thinking about breaking into the TV market, a change that opens the door to an AT&T-type exclusivity deal, reasoned IDC Research Manager Greg Ireland.
Satellite TV Alernative
"A go-to-market strategy in conjunction with a pay TV provider who does have the content licenses Apple wants will allow Apple to do what it does best: create a great device with a great user experience," Ireland told MacNewsWorld.
One reason Apple shied away from negotiating with content distributors in the past is the industry's fragmentation. Cable companies are regionalized, with no single company having a national footprint. From that standpoint, if an exclusive deal were done, it might make more sense to do it with a satellite TV provider, which would have a national presence.
"It would be restrictive to do an exclusive deal, but satellite would get Apple nationwide," Ireland noted.
However, even with 20 million subscribers, a satellite outfit like DirecTV may lack the volume Apple needs to make its TV model work. That's why an exclusivity deal in television won't work, according to NPD Group Analyst Stephen Baker.
Can't Live In Past
"There's a real value to critical mass in television where in phones, any carrier could get you access to a huge base of subscribers and with a broad reach," Baker told MacNewsWorld.
"For Apple's model to be successful it depends on ubiquity and mass adoption in order to provide the revenue and profits that content providers want," he added.
Dipping into the past for a solution to current problems getting its TV business off the ground would be a mistake, according to Chowdhry. "It's flawed to think that what worked in the past will work in the future," he said.
"Thinking in terms of AT&T is a suicidal strategy," he declared. "It won't work."
"We are not in the iPhone decade," he added. "We are in 2012. The world has changed. The world has matured. Expectations have changed. Apple needs to change, too."